Eugene A. Beck, et al. - Page 20




                                       - 20 -                                         
          1991 Federal income tax return and under section 6651(f) for                
          fraudulently failing to file Federal income tax returns for 1992            
          and 1993.                                                                   
               Respondent has the burden of proving fraud by clear and                
          convincing evidence.  Sec. 7454(a); Rule 142(b); Parks v.                   
          Commissioner, 94 T.C. 654, 660 (1990).  Respondent must prove by            
          clear and convincing evidence (1) that petitioners underpaid                
          their taxes in each year and (2) that petitioners intended to               
          evade taxes by conduct intended to conceal, mislead, or otherwise           
          prevent tax collection.  Parks v. Commissioner, supra at 660-661.           
          I.  Underpayment of Tax                                                     
               First, respondent must prove by clear and convincing                   
          evidence the existence of an underpayment of tax for each of the            
          years at issue.  For fraud purposes, respondent may not rely upon           
          petitioners' failure to carry the burden of proof as to the                 
          underlying deficiency. Id.; Petzoldt v. Commissioner, 92 T.C.               
          661, 700 (1989); Estate of Beck v. Commissioner, 56 T.C. 297, 363           
          (1971).                                                                     
               Respondent asserts that, using the bank deposits and cash              
          expenditures method, Beck's Liquors underpaid its tax by                    
          $44,274.16 in 1991, $23,047.49 in 1992, and $37,064.66 in 1993.             
          Respondent asserts that Mr. Beck received constructive dividends            
          from Beck's Liquors in each of the years at issue, and, as a                
          result, Mr. Beck underpaid his taxes in 1991, 1992, and 1993,               






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